Foodservice industry forecasts project moderate but real sales growth and the most recent earnings report from Sysco seems to fall in line with these prognostications.

Sales for broadline distributor Sysco, one of the largest suppliers to the foodservice market, reported sales of $10.8 million for the quarter ending Dec. 29, 2012. That represents a 5.4 percent increase compared the same time frame in 2011.

The company stated that its internally calculated food cost inflation was 2.5 percent. Sysco also reported that sales from acquisitions added 1.1 percent while exchange rates increased sales by 0.3 percent. Assuming that the company passed on all of the 2.5 percent food cost increases, the real growth should have been roughly 1.5 percent (5.4 percent less 2.5 percent less 1.1 percent less 0.3 percent). Sysco also reported that its case sales, without counting volume from acquisitions, increased by 1.8 percent.

It is possible that all of Sysco's growth came by increasing their share of the market but that's probably unlikely. Thus, given the giant distributor's market share, we can speculate the foodservice segment had some real growth in last quarter.

Economic News This Week:

The U.S. employment picture remains cloudy based on various reports and analysis from this past week. For the week ending Feb. 1 first time jobless claims totaled 366,000, falling by 5,000. The number of claims filed has been in this range for more than 6 months and it appears that the 2 weeks when claims dropped to approximately 330,000 in January was an anomaly. For comparison, initial jobless rates averaged 331,000 a week in 2005 and 312,000 in 2006. Further, the Gallup Organization reported that more small businesses were cutting workers than hiring as the U.S. payroll to population rate fell to 43.7 in January and is now below the average for 2012. Also, the U.S. Job Creation Index fell to an 11-month low in January. Finally, an economist at the Economic Policy Institute calculated that while the country has added 2 million jobs in the last 12 months, the U.S. remains 3 million jobs below the employment level at the start of the recession and, given the rate of new jobs added in January, it will be 2021 before the country is back to prerecession employment.

The Institute for Supply Management's Non-manufacturing Index for January declined slightly to 55.2 from December's 55.7 but this shows continued growth in the service sector, just at a slightly slower rate. New orders and production dropped but hiring intentions hit a seven-year high. So that represents a ray of sunshine given that 80 percent of U.S. jobs are in the service area.

Orders for manufactured goods, as measured by the U.S. Department of Commerce, rose 1.8 percent in December after a decline of 0.3 percent in November. However, a major part of the increase was due to defense-related orders. Without defense spending, orders were up 0.3 percent. Not counting defense orders and civilian aircraft orders, capital goods orders were down 0.3 percent.

Productivity fell 2 percent in the 4th quarter last year, the sharpest drop in 2 years. Unit labor costs rose 0.7 percent. Both results were more or less expected given the previously reported 4th quarter drop in Gross Domestic Product.

Consumer borrowing rose at an annualized rate of 6.5 percent because of increased use of non-revolving debt such as auto and student loans. Credit card debt increased just 0.1 percent as consumers seemed reluctant to take on more debt. Another study by the Federal Reserve said banks are reporting strong demand in business, home and auto loans.

Compared to the previous month, home prices decreased by 0.1 percent in November, according to the S&P/Case-Shiller Index. Despite this modest decline, home prices were still up 5.5 percent when compared to November 2011. CoreLogic, which monitors sales of homes, said home prices grew 0.4 percent in December and were up 8.3 percent for the year. CoreLogic also said home prices are still down 26.8 percent since April 2006.

Foodservice News This Week:

Valentine's Day – what's not to love? A lot, according to a Wall Street Journal article. While some operators look at Valentine's Day as an opportunity to drive volume with special deals and menus, other restaurateurs find it boring. One chef said that half the people don't want to be there (possibly the male half?) and points out the practical matter that when the restaurant is filled with couples eating at tables for 4, it means the operation is generating just half of the sales. One chef in London was quoted as saying you have to be "ruthless" and increase the prices.

Valentine's Day may vex some restaurant operators but the National Restaurant Association says that one fourth of the people in the U.S. plan on dining out to mark the occasion. When asked about favorite Valentine's Day presents, 46 percent of the men surveyed chose restaurant gift cards. For women, jewelry (37 percent) and flowers (23 percent) were the most popular. Only 13 percent of the ladies favored restaurant gift cards. Perhaps that's because they expect their husbands and boyfriends to spring for dinner.

Casual dining shows signs of life according to a study by Technomic, Inc. Four out of five casual dining customers say they visit these style restaurants at least once a month. Compared to two years ago, consumers today are more likely to visit casual restaurants for a variety of occasions.

Four restaurants rank among the top ten franchises poised for growth, according to Entrepreneur Magazine. These concepts are Subway (no. 2), Denny's (no. 8), McDonald's (no. 9), and Pizza Hut (no. 10). Restaurants took 25 out of the top 106 positions in the magazine's list of the top 500 franchise opportunities.

McDonald's once again did better than projected by both restaurant investment analysts and the company themselves. McD's January comparable store sales increased 0.9 percent in the U.S. while comps for the entire corporation were down 1.9 percent.

The blackout at the Super Bowl may have caused a modest increase in sales for Buffalo Wild Wings and Domino's Pizza as viewers continued to order during the game delay according to CNBC.

Growth chains: Denver-based Garbanzo Mediterranean Grill is expanding into Arizona with an agreement to develop 20 restaurants. Schlotzsky's is planning on opening 50 restaurants this year. Dunkin' Donuts has agreements with two franchisees to open 11 new locations in New Orleans. Topper's Pizza with 50 current restaurants has an additional 15 locations in development. Jake's Wayback Burgers will open 8 new restaurants in February and March. Panera's Bread Company expects 115 to 125 restaurants this year. Chipotle has plans to add 165 to 185 new locations in 2013. Quaker Steak & Lube will open 17 new restaurants this year, most franchised but with 4 or 5 company owned. Starbucks will add 150 new locations in Canada this year, many of them in Target stores.

Comparable Store Sales Reports: Country Style Cooking said that their comps "improved slightly" over the previous quarter when same store sales were down 5.4 percent. Good Times (up 10.2 percent), McDonald's (up 0.9 percent), Panera Bread (system up 4.9 percent, company owned up 5.1 percent and franchised up 4.7 percent), Pizza Inn (down 4.5 percent), and Yum (Blended up 3 percent, KFC up 4 percent, Pizza Hut down 1 percent and Taco Bell up 5 percent.)